Regression channel

[jjwint]

Hi, I'm hoping to get some input from other users/traders as well as developers. Thanks in advance.

I've used REGRESSION CHANNELS (RC) in other trading software and by comparison the NINJA RC appear to be much too narrow.

I assume that price is Normally distributed so if your RC is built using Close price, you'd think that 95% of Closing prices in a swing would be inside two standard deviations. As far as I can tell after drawing a Ninja RC set to 2 Std Dev and counting bars outside the channel . . . I typically find that over 20% of bars Close outside the two standard deviations. So what Ninja calls "2 standard deviations" is more like 1.5 (? just a guess).

Now you might think . . . "well, but some swings are more volatile than others" . . . and that's true. But as I understand it, the linear regression formula used to construct the center line would take increased volatility into account.

So . . . .

1) Any general thoughts welcome. Or if my understanding of Regression Channels is wrong, school me.

2) Is Ninja using something other than a Normal distribution?

3) Does anyone know of a RC (third party) that does appear to include 95% of Closing prices?

Thanks again

John

[NinjaTrader_Jim]

Hello jjwint,

Thanks for writing in and welcome to our Support Forums!

The width variable in the Regression Channel indicator represents the total number of standard deviations, not the number of standard of deviations for one direction. This means that a width of 2 would represent having standard deviations of 1 going in either direction.

If we set a Regression Channel indicator with a period of 20 and a width of 2, we can observe 20% of the close prices within that period will be outside of the standard deviation lines. I observe 4 bar closes outside of these lines, which is consistent with having 1 standard deviation in each direction.

If we set a Regression Channel indicator with a period of 20 and a width of 4, we can observe 95% of the close prices within the two standard deviation lines. I observe 1 bar close outside of these lines, which is consistent with having 2 standard deviations in each direction.

The indicator works correctly. If you wish to view Regression Channels with 95% of close prices within the standard deviation lines (2 standard deviations per direction,) please use a width of 4.

The following code demonstrates how to plot this indicator in a strategy with 2 standard deviations going in either direction:

protected override void Initialize()
{
    Add(RegressionChannel(20, 4));
}
...
protected override void OnBarUpdate()
{
     RegressionChannel(20, 4).Lower[0]; // Reference the Lower plot value
     RegressionChannel(20, 4).Upper[0]; // Reference the Upper plot value
     
}

Please let me know if I may be of further assistance.

[traderforexfx]

Estratégias forex com base em indicadores

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06# Negociação Estocástico RSI
07# Sistema Oscilador
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10# Reversão Bandas de Bollinger
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15# Sistema Forex 30min
16# Linhas Bandas Forex
17# Negociação Linha de Tendencia
18# Negociação Divergência
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20# RSI CCI MCDA
21# Tendência Momentum
22# Impulso momento Forex
23# H4 MCDA
24# Sistema Negociacao RSI
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26# EMA Duplo Estocástico
27# Gann Hillo Sistema
28# FX Negociação
29# Fibo Breakout
30# Metodo negociação Estocastico
31# Ponto Pivot
32# Média Móvel Parabolic SAR
33# RSI MA

[jjwint]

OK . . . that's perfect. Exactly what I need to know. Once again, Ninja Support Team rocks. Thanks Jim.